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Covering operations put stocks back on the track

KARACHI - A strong mid-week rally put the Karachi stocks back on the rails after leading institutional traders resumed covering operations at their pre-determined lower levels on the blue chip counters. After breaching the barrier of 5,400, the KSE 100-share index managed to finish well above it despite late weekend selling and finally ended around 5,409.37, up 21.53 points and so did market capital at Rs1,460.00 billion as compared to Rs1,454 billion a week earlier.

The incentive-packed new trade policy for the year 2004-5 is expected to generate a good bit of fresh covering purchases by the next week on those counters, notably the textile one, which are to benefit from the incentive package. Export will get the needed boost.

The euphoria associated with the Pakistan Petroleum IPO is over as investors are said to have made a massive investment of about Rs20 billion in it but still there is no liquidity problem in the market as a lot of money is still floating around for gainful investment.

Although leading shares finished the week with clipped gains amid highly volatile price movements,the breach of the pyshological barrier of 5,400 after several lean sessions reflects that the bulls are in full control of the situation.

Snap increase in the carryover rates and volume to 13 and 28m shares did sent shock waves among the jobbers and the weakholders at the fag-end of the week, most of whom liquidated long positions in a bit haste,halting the market upturn.

But there is nothing to suggest that the mid-week run-up is overdone as board meetings of some of the mega issues and rumours of interim dividend and bonus share could keep investors in a good mood,says a leading broker.

Reports of a massive public response to the Pakistan Petrolem (PPL) share offer and disappointment of the big operators also signalled the return of the prodigal son back to the share business.

"The buying euphoria generated by the PPL issue may not have faded and many may continue to hope against hopes to be in its fold after balloting but the odds are heavy as the number of applicants is stated to be well a million," bankers say.

The next week could be very crucial for the future direction of the market as board meetings of some of the leading companies are due amid rumours of good interims. The board of PSO,Engro Chemical, Al-Ghazi Tractors, Fauji Fertiliser, Bank Al-Falah and some others will meet during the next week amid strong rumours of interim cash dividend and bonus shares. Earlier, a record fall in the volum figure to a low 136m shares reflected that all roads led to the investment counters in the banks rather than the stock market. In addition to a massive outflow of liquid funds from the share market, general investors as well small savers were also out to try their luck to be a part of the mega issue,such the Pakistan Petroleum (PPL).

After opening higher,stocks came in for stray selling later and finished reacted as some of the leading bears manipulated the higher badla volume figure to direct the market trend.

The selling in part was also attributed to outflow of large amounts of cash to the IPO of Pakistan Petroleum, which opened for public subscrpition on July and closed on July 22. It appeared that the issue of the PPL will be massively oversubscribed despite some pre-IPO confusion was created by some of the interested parties but later clarified by the highups of the KSE, brokers said.

The Pakistan Petroleum (PPL), one of the leading mega issues listed on the KSE, offers 68.5m shares at the Rs55.00 per share including a premium of Rs45.00 on a 10-rupee share. Its shares value on last Friday finished at 113.40 and ended slightly lower below this level during the week.

With an yield of eight per cent, the PPL stands out on all key valuation norms above the OGDC. The governments vows to give preference to small applicants of 500 shares.

Analysts said the market ruled sluggish earlier in the week with the opening of PPL IPO as some of the investors lined up funds to buy its shares from the open market also as it is billed a good buy at the current rates.

However, there is nothing wrong with the market's inherent strength and bulls will be in the market after the IPO of PPL is closed and a good part of the invested will be back in the share business again, they said.

Minus signs dominated the list, although most of the losses were fractional reflecting lack of support rather than large selling from any quarter.

Gul Ahmed Textiles, Javed Omer, Mehmood Textiles, Quetta Textiles, Unilever Pakistan, Pakistan Hotels, Siemens Pakistan and Pakistan Services were an exceptions,which suffered fall. Nestle MilkPak, Aventis, ICI Pakistan were leading among the losers.

But on the other hand some of the leading shares put on sharp gains.